Pam Fowler and her colleagues had just finished their presentation Monday on their vision for radically restructuring the federal student loan program -- creating a single loan program (rather than the several that exist now), allowing students to borrow up to the cost of attending college minus the amount of other student aid, basing repayment on a borrower's financial circumstances at the time of repayment, among other big ideas -- when the logical question came from a member of the audience.

"How," he wondered, "would you implement something of that magnitude when it's taken us 40 years to even have the discussion" about starting over?

Fowler seemed to know the question was coming, and she tried not to have her answer seem like a cop-out. "We don’t want to get bogged down in details until we’ve had the discussion," said the financial aid director at the University of Michigan. "If you get caught up in specifics, you're going to miss the whole concept we're trying to move forward."

Underscoring that exchange were several realities that emerged at this week's annual conference of the National Association of Student Financial Aid Administrators, in Orlando. The session led by Fowler and a small group of other financial aid administrators who have been working quietly for two years on a new federal student loan model was one of several recent signs of growing recognition that the federal financial aid system is broken and needs fixing:

• At the same time that the aid directors' group was explaining its model to a receptive group of more than 100 financial aid officers, the leaders of the College Board-sponsored Rethinking Student Aid initiative updated another NASFAA gathering about its work, in which a group of leading economists and financial aid experts is crafting a package of proposals for restructuring the federal student aid system.
• Today, the financial aid directors' association and its new leader, Philip R. Day, plan to announce that NASFAA is undertaking its own "national conversation" -- a broad set of discussions and, ultimately, policy recommendations -- designed in part to help figure out how to better get students into and successfully out of higher education. The structure and viability of the current financial aid system will be central to the group's review.
• And officials of the U.S. Education Department, whose Commission on the Future of Higher Education drew significant attention to the issue with its early rhetoric about a "dysfunctional" higher education financing system and its call for a complete restructuring of federal financial aid, hinted during a recent news conference that even in their waning months, they may yet seek to weigh in on how federal student aid is allocated. They offered no clue about how they might do that, with just a few months left in office, but the department is playing host to a summit on higher education in Chicago next week.

"I do think that there's an appetite, an eagerness about the idea of having a new framework" for student aid, Michael McPherson, president of the Spencer Foundation and co-chair of the College Board's Rethinking Student Aid study group, said in an interview Monday. "There's an interest in a conversation about going beyond simply tweaking the details" of the financial aid system.

In at least one way the political climate may be right for such a conversation actually going somewhere this time, with a presidential transition ahead creating the possibility of a new administration taking a fresh look at federal programs.

But McPherson and others are not sanguine about the political challenge implicit in the audience member's question described above. Any time serious consideration is given to major changes in the federal student aid -- like when the Bush administration has proposed eliminating funds for programs like Perkins Loans or Supplemental Educational Opportunity Grants and shifting the money to Pell Grants -- advocates for the potentially vanquished programs rise up and defend it and the students who might be deprived of the benefits (usually arguing that students would suffer a net loss in federal support). The response from higher education has made it easy for members of Congress and Education Department officials to complain that college leaders seem to think that the only answer to fixing student aid is "more money," said Sandy Baum, the Skidmore College economist and College Board consultant who is McPherson's co-chair.

So anyone seeking to refashion the student aid system has both a public policy challenge and a political one. The former involves trying to create a more cohesive (and, most agree, simpler) array of programs that will do a better job of bringing low- and middle-income students into college and ensuring that they succeed once there; it is widely agreed that most of the recent changes in federal student aid policy, including the creation of grant programs for scientists and teachers, have been ill-conceived.

But any major realignment of federal student grants, loans and tax benefits will almost certainly create winners and losers -- and the political challenge will be to ensure that the "losers" see enough overall gain, in terms of increased funds for students, to be willing to put their self-interests aside.

The College Board Effort

Finding the right mix of public policy rigor and political awareness has been a focus of the College Board's Rethinking Student Aid initiative, which is funded by the Mellon and Lumina Foundations as well as Spencer. The group's report will not be released until October, and at their session Monday, Baum and McPherson provided only a generic update on the group's philosophy and work, declining to discuss details of its emerging recommendations.

But to illuminate the group's effort to stimulate sound public policy that is not seen as politically pie-in-the-sky, Baum cited government programs that use the federal tax code to help students pay for college. Most scholars and other public policy experts, if pressed, she said, would probably agree that the federal tax code is far from the best way to deal with college access, since most financially needy students -- those whom federal financial aid was initially designed to assist -- pay little or no taxes.

So if one was designing a federal financial aid system based purely on the soundest public policy, you might ditch the tax code altogether, and put the billions the government now spends on the Hope Scholarship, Lifelong Learning tax credit and other initiatives into grant aid.

But those tax credits help many middle-income families and, in turn, enormously popular with politicians who like to keep the middle class happy. They "aren't going away," Baum said, and the College Board panel, in crafting its recommendations for fixing the student aid system, is "accepting the notion that [tax breaks for college] are here to stay."

That's all she would say about the panel's work, consistent with her desire not to tip its hand until its proposals are formally revealed in October. But reading between the lines, the study group is likely to embrace some version of the refundable tax credit (which would benefit low-income students) that one of the group's members, Susan Dynarski, an economist at Harvard University, has urged in Congressional testimony and other writings.

'New Paradigm' for Loans

While the College Board panel is striving to balance the philosophical and the practical in formulating its recommendations, the group of financial aid officials who presented their vision of a 21st century student loan program Monday took a very different approach.

The student loan industry is a deeply divided one, with its own set of parochial interests -- supporters of the guaranteed student loan program and the government's competing direct loan program, officials (mostly at expensive private and for-profit colleges) who favor higher limits on the amount of loans a borrower can take and those at community and lower-cost public colleges who tend to support lower limits.

The financial aid directors -- who, in addition to Fowler, included the University of Idaho's Dan Davenport, Anna Griswold of Pennsylvania State University, and Rick Shipman of Michigan State University -- sought when they first met two years ago to engage in a "willing suspension of disbelief," said Shipman, to think outside their parochial interests and the proverbial box in which they and their peers tend to operate day to day.

"We've got a very inefficient system with multiple loans: subsidized federal loans, unsubsidized federal loans, Perkins Loans, [parent] loans, private loans, [graduate parent loans] -- using all of them to try to piece together some kind of financing package for students," said Davenport of Idaho. "Our goal was to challenge aid administrators to create a better system."

The discussion they hosted in 2006 -- the National Forum on Education Loans -- sought to conceive an ideal education loan program that met several key goals: providing a predictable source of funding for students, being understandable to students and families, encouraging rather than discouraging students from entering low-paying fields and, most of all, helping to encourage college enrollment in the same way as earlier expansions of federal aid, like the GI Bill.

The broad conceptual model they laid out in their presentation Monday would create one loan program using one central source of funds (perhaps including money from banks and other private investors as well as federal money), deliver funds exclusively through a borrower's college or university, set repayment terms based on the borrower's financial circumstances/income during repayment, provide tax benefits to employers or family members who help a borrower repay the loans, and provide financial literacy education for borrowers. (An alternative proposal Monday, from Joe L. McCormick, executive director of the Kentucky College Access Network, envisions a lifelong learning account into which money would be deducted from every paycheck to largely replace federal grant and loan programs.)

Although she discouraged the audience member's question about the practicality of implementing the group's ideas, Fowler said she had been heartened by how much momentum the idea of restructuring the federal student aid system has gained in the two years since the group first met. "Maybe this isn’t the impossible thing we may have envisioned when we started out," she said.

The political hurdles may seem high, Fowler acknowledged. But gaining philosophical agreement from financial aid directors -- which at least the dozens of officials in the audience seemed to offer -- was an essential start, she said, given how opposed many college administrators sometimes are to change.

"Until we as professionals, and students and parents as consumers, say enough is enough, things aren't working," Fowler said, "it will never happen."